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Dixons enjoys its up-and-down Christmas - UPDATE

- Q3 LFL sales up three per cent
- Group gross margins down 0.5 per cent
- Q4 expected to be 'more modest'

Electrical retailer Dixons thwarted the predicted incursions by rivals such as Amazon and Argos to deliver an exciting Christmas trading package.

Chief Executive Sebastian James pointed to a up-and-down period between November 1st and January 4th, with group like-for-like sales levelling out with 3% growth, although group gross margins were down 0.5% most likely due to discounting.

This was against tough comparatives figures from the year before, but down from the 6% growth the group enjoyed in the first half of the current year.

Thanks to pre-Christmas discounting, sales in UK and Ireland during the 'Black Friday' weekend were remarkably busy but were followed by a quieter couple of weeks up until Christmas Day, he said.

"From Boxing Day, the business took off like a rocket - in fact, Boxing Day itself was the biggest in Dixons' UK history with more than £100,000 flowing through our tills every minute."

UK & Ireland lifted like-for-likes 5% with further market share gains, with Currys and PC World stores benefiting from their well-established multichannel offering, with internet-led sales growing by 23%.

Brokers noted that the UK performance was even more impressive given Dixons had passed the anniversary of rival Comet going into administration.

Northern Europe performed well against a competitive backdrop, building on last year's exceptional growth and, according to James, winning the "festive scuffles" with competitors in most markets.

Northern Europe like-for-likes were up 2%, with sales growth in Greece of 3% driven by our successful wholesale business, but retail like-for-likes down 8%.

"Sweden and Finland had a particularly successful Christmas with Denmark and Norway a little less exuberant," he said.

"Our Greek business is still operating in a tough consumer climate but has rallied well with a strong wholesale business taking it into growth."

Looking forward, James cautioned that management continued to plan with the view that the UK recovery was still fledgling.

"We have some very strong comparables in the fourth quarter and, with a later Easter as well, I expect performance in the remainder of our financial year to be more modest than the year to date."

Analyst Kate Calvert at Investec reiterated her 'buy' recommendation and argued Dixons was "more than capable" of delivering double-digit earnings growth from "self-help, developing supplier relations, expanding service options and has the opportunity on the horizon to refinance expensive debt".

She said Dixons' valuation remained undemanding for future growth prospects, priced at a 2014 ratio of 15 times earnings before trading began on Thursday morning.

"We believe this is undemanding for a business capable of delivering double digit EPS growth driven by self-help (continue store portfolio restructure), developing supplier relationships and service options, further consolidation and the potential ability to refinance expensive debt in 2015."

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